Making Sense of the Toyota/Tesla Deal

When you think about it, Elon Musk’s decision to name his electric sports-car company after Nikola Tesla made for a perfect match. Tesla, the scientist, was originally known for his groundbreaking research into electricity and electromagnetism, but his later years were taken up by lawsuits, constant battles to get his projects funded and an increasingly eccentric personal life.

Needless to say, it doesn’t take much creative license to apply that template to Musk, which would seem to make Tesla, the automaker, an odd choice for a Toyota investment. Yet back in May, Toyota ponied up $50 million and the NUMMI plant in California to partner with Tesla on future products, with the future arriving a lot quicker than most people thought.

The latest news has Tesla preparing to deliver two prototype vehicles—essentially Toyota products fitted with Tesla powertrains—by the end of July.

It’s quite the sea change from August of 2009, when a New York Times headline read “Toyota, Hybrid Innovator, Holds Back in Race to Go Electric.” Even more recently, in January of this year, CNN.com ran a lengthy article about “Toyota not betting on an electric love affair.” In that last story, Bill Reinert, head of advanced powertrain research for Toyota, was quoted as saying “We don’t look at electric cars as a replacement for internal combustion cars,” because, after all, “A car that has a 100 mile range and needs to be recharged for eight hours after that, that’s not flexible enough for the modern family.”

Now, I wonder if anything might have happened in the intervening six months to get Toyota to change its approach to electric cars … perhaps some kind of occurrence that struck at the core of Toyota’s brand equity … something that necessitated a quick fix to get people once again talking about Toyota as an innovative, forward-thinking company dedicated to helping protect the planet … even if it meant leveraging another automaker’s technology, a situation that would have once been unthinkable to the folks who perfected hybrid powertrains … and if the result would also put people back to work at the company’s only California assembly plant (NUMMI), so much the better.

Yes, I’m thinking the Toyota recallathon has once again reared its ugly head here. Toyota’s sudden interest in Tesla and electric vehicles strikes me as nothing so much as a calculated ploy to take customers’ minds off of the former’s ongoing quality woes—another couple hundred thousand Toyotas and Lexi were recalled for engine problems just a few days ago—and steer them in another, greener direction.

Of course, it’s also possible Musk is using some kind of Jedi tricks on the folks at Toyota. After all, it was exactly a week ago today that he was quoted on Forbes.com as saying “that if Tesla was just to sell sports cars and do powertrain work [for other] companies”—a perfect description of the Tesla/Toyota prototypes—”we would be profitable.”

Charles Krome is a long-time automotive journalist who spent more than 10 years on the inside at General Motors and Ford, and also has corporate communications experience with Audi, Porsche and BASF Automotive Refinish. As a big motorsports fan growing up in the Detroit area, Krome was lucky enough to be able to attend numerous NASCAR, Indy car, F1 and SCCA events while still in his formative years. This, combined with a childhood that included significant (passenger) seat time in cars from Lotus and Jensen Healey, made him a car guy at an earlier age. Today, he lives in metro Detroit with his car wife, raising car kids.